FAKULTY OF HOTEL MANAGEMENT AND TOURISM

ECONOMIC FOR HOSPITALITY MANAGEMENT (ECO

560)
(SEMESTER OCT 2020 – JAN 2021)
CASE STUDY 1

WAN NURUL HIDAYAH BINTI WAN ZAINI

2019805582
HM2403A2

DUE DATE:10 DECEMBER 2020

LECTURER: DR. SANTHANAMERY THOMINATHAN

 ACKNOWLEDGEMENT

Grateful to Lord with his bounty I was able to finish my case study 1 . I feel very
grateful that everything went smoothly and that the difficulties that . Although the
situation is not in our control ,but with the efforts of us all challenges can be
overcome. I would also like to thank the lecturer DR. SANTHANAMERY
THOMINATHAN for guiding and giving guidance throughout the course. I also want
to say thanks you to my friend who always teach me n guide me to complete my
task. Without their help I may not be able to complete the task well.

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TABLE OF CONTENT

No. Content Pages

1 ACKNOWLEDGEMENT
1
2 TABLE OF CONTENTS 2

3 MARKET STRUCTURE : OLIGOPOLY 3-4

4 THE INTRODUCTION OF INDUSTRIES 5-6

AND THE CHARACTERISTIC
5 CONCLUSION 7

6 REFERENCES 8

7 APPENDIX 9-10

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Market Structure Of Oligopoly

The market structure that use in this case study is oligopoly. Oligopoly is a market
structure that sells and produces only certain products. This market structure has 3-10
manufacturers that meet the market demand largely. This market have few sellers,
homogenous and its difficult marker entry. Oligopoly is not big scale among competitor
it’s a few only. Even the firm in that countries large number but it only dominated by certain
firm. The market sale or share mostly held by 3-4 firm. About 75% was dominated by
them.

Oligopoly always be a leader of the sector that important to citizen or consumer.

They was part of produce the basic need like automotive, food manufacture and electrical
and etc. Besides, the factor of oligopoly is because they have the big scale of product
that be a necessary item to consumer daily life and pass the limit of a company producing
technology. Next factor is they also participate in promoting their product and it use a lot
of capital to run the promotion event. In addition the company which is be labelled
oligopoly may have a strategic control in their raw material and paten registration. The
oligopoly market is difficult to compete with the prices of manufactured goods. This is
because they are more focused on the quality of goods, benefits and also customer
satisfaction. They produce products that are almost identical and alternate with each
other.

There are several features that allow a market to be called oligopoly. Among them
is to have several firms that are interdependent. Some firms usually pay attention to their
competitors in allocating capital, pricing and their target market. Therefore the profitability
of a firm is influenced by its competitors. The next feature is homogeneous or almost
identical output. Examples of its markets such as telecommunication services petrol,
sugar and cigarettes in addition the power that influences the firm's market can make
them an oligopoly structure. This is because, they are able to influence the market price
level depending on the cooperation between firms. They follow the development of their
rivals and go through the same approach. For example a firm that does a decrease in the
price of goods or a rise in the price of goods, another firm will do the same.

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 These oligopolies have difficult characteristics and have barriers to enter the
industry. This is because there may be restrictions imposed by the government in terms
of patents, copyrights, financial allocations and etc. The characteristic of the small number
of establishments also indicates that a firm is labeled as oligopoly. Some of these firms
have 2 or more of them capable of dominating the industrial market. For example the
sugar production industry in which Malaysia has 2 or more firms but they can dominate
the market because the product is a consumer need in daily life. Oligopoly firms are not
involved or focused on price competition, they are more focused on advertising,
promotional, packaging activities. They may not compete in terms of price as other firms
may change the price of their product to match the price of the competitor. However,
some firms use a coupon or gift offer approach to increase their sales rather than lower
the price of goods.

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The Establishment And The Characteristic Of MSM Holding As Oligopoly Market
Structure.

In the case study firm that fits the characteristics of this oligopoly is MSM
Malaysia Holding. This company is a subsidiary of FGV Holding Berhad MSM is a
company operating in the largest sugar factory sector in the country. MSM was formerly
known as Malayan Sugar Manufacturing Co. Bhd. And assimilated with the mission to
establish a sugar refinery in Malaysia. At that time Malaysia was still dependent on
Britain and Hong Kong in the import of white granulated sugar. After that, Malaysia
together with 2 companies from Japan have become partners and formed the MSM
company. Their company triangle logo is the identity of the 3 parties that set up the firm.

PBB group owned by Tan Sri Robert kuok has announced the sale of the entire
equity in MSM to FGVH (FELDA Global Ventures Holding). The equity is 50% of FELDA
Perlis Sdn Bhd (KGFP) shares and 20% of shares in Tradewinds (M) Bhd. This shows
FGVH controlling 70% of the sugar supply and ending the kuok administration dubbed
the King of Sugar in the country over the previous 45 years. MSM HOLDING has 5 sugar
filtering production operating companies under it. Among them are MSM Prai Berhad,
MSM Perlis Sdn Bhd, MSM Sugar Refinery (Johor) Sdn Bhd, MSM Logistics Sdn Bhd
and MSM Trading International DMCC. That is some extent the introduction of MSM
companies.

The characteristics of the company that symbolizes oligopoly are duopoly. In the
oligopoly market structure there are 2 companies that will control the market. MSM
Holding is said to be dual because there are two major companies in the sugar industry
in Malaysia. Malaysian sugar Manufacturing Bhd and Tradewing Bhd have caused the
sugar industry in Malaysia to be duopoly. 56.9% of the market is from CPO, 43.1% is
Triways. Newcomers pose a minimal threat as both firms have strong strengths.

The next feature is homogeneous. This is said to be because these MSM and
Tradewing companies produce sugar products that are indistinguishable. This
indistinguishable product at least looks the same physically In terms of product form,
benefits and quality. So this illustrates that sugar products that have the same benefits,
characteristics and quality make these two companies homogeneous.

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 Next this company is also a type of company that has high barriers to enter the
market. This feature has made MSM a company that dominates the sugar market due to
strict conditions resulting in the company not having many competitors. The industry
needs high capital, the quota of raw sugar imports and most of its profit margins depend
on the scale of the economy. The large-scale plant based in Prai and also the second
largest sugar refinery in the world allows MSM to reap economic benefits.

The next feature is not involved in price competition. This is because the prices of
their products cannot be replicated. CPOs are not involved in competing to change the
market price of their products. They prioritize process, quality and technology. High usage
rates, sophisticated equipment and distribution systems have resulted in efficiency in cost
management. They are also working to expand the capacity of their products. In Malaysia,
sugar products are categorized as goods under government control. The government will
control prices by setting ceiling prices or subsidies,

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Conclusion

In conclusion this oligopoly market structure becomes the MSM holding an

important firm in sugar manufacturing industry and meets the needs and demands of
consumers. This oligopoly can also be seen from the characteristics mentioned that
involve only a small part of the industry and its impact on the economic scale is very
important and at the same time makes it an important industry in Malaysia.

7
References
Barnier, B. (2020, 3 29). oligopoly. Investopedia. Retrieved 12 9, 2020, from
https://www.investopedia.com/terms/o/oligopoly.asp#:~:text=Oligopoly%20is%20a%20market
%20structure,is%20two%20or%20more%20firms.

Farzana. (2013, 10 24). microeconomics webblog. Blog. Retrieved 12 9, 2020, from

http://microecons101.blogspot.com/2013/10/malayan-sugar-manufacturing.html

Glossary, E. (2007). economic definition of homogeneuos. Economic Glossary. Retrieved 12 8, 2020,

from https://glossary.econguru.com/economic-term/homogeneous+product

HOLDING, F. (n.d.). FGV HOLDING. Retrieved 12 9, 2020, from https://www.fgvholdings.com/home/

MSM Malaysia Holding Berhad. (2018). Retrieved from http://www.msmsugar.com/

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Appendix

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